Second Circuit Finds Alleged Reckless Failure to Disclose Loan Used to Pay Rent to Lender Was Sufficient to Give Rise to Strong Inference of Scienter
On August 3, 2020, the United States Court of Appeals for the Second Circuit reversed the dismissal of a securities fraud claim brought pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). Setzer v. Omega Healthcare Inv'rs, Inc., 2020 WL 4431902, at *1 (2d Cir. Aug. 3, 2020) (hereinafter, Setzer v. Omega). The Second Circuit analyzed both the factors giving rise to a duty of disclosure and how to assess scienter in the context of an allegedly reckless (as opposed to intentional) non-disclosure and held that allegations about the allegedly reckless failure to disclose a loan used to pay rent to the lender were sufficient to give rise to a strong inference of scienter.